Merrill-Lynch econo-speak: ringfence, premia

David Bergdahl dlbrgdhl at GMAIL.COM
Tue Dec 30 14:50:58 UTC 2008

from a Global Economics report for 11.26.08: *ringfences*  and  *premia *[pl.

*The government becomes riskier *
As the government ringfences a greater share of the private sector, it is
transferring risk to itself. Government risk premia –whether in CDS markets
or in
yield curves– are likely to rise everywhere, particularly in countries with
budget deficits and high starting levels of government debt (see Table 6 and
theme 2).

I have never seen either of these.  The first seems a British import but the
second may just be finance professor jargon.  A search for
*ringfences*finds a Financial Times headline from September 15 2008:
"Japan ringfences
assets" by Michiyo Nakamoto in Tokyo. A blog* *named* *London Banker for
September 12 gives an explanation of the term: "The principle of using local
assets for local recovery is known as the 'ring fence' – the idea being that
insolvency drops an invisible 'ring fence' around any valuable assets at the
borders to meet claims arising within the borders. No country is more
assiduous in weaving the ring fence than the United States of America. It is
a very successful strategy for US creditors. US creditors of failed
international banks tend to recover disproportionately relative to creditors
anywhere else. The ring fence contains all these choicest assets for US
creditors, and all the international creditors are forced to pick among the
dross of foreign assets to eke out a recovery, only receiving any residual
US assets remaining after US creditors get 100 percent recovery."

A Stanford Univ webpage contains the phrase "risk premia":

The American Dialect Society -

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